State: County should increase its fund balance

Tuesday

Dec 18, 2012 at 12:01 AMDec 18, 2012 at 4:37 PM

Chris Lavender / Times-News

GRAHAM — Alamance County’s fund balance has come under scrutiny by the Local Government Commission this month.

Sharon Edmundson, director of the Fiscal Management Section of the North Carolina Department of the Treasurer, sent a letter on Dec. 12 to Commissioner Tom Manning regarding her concerns about the county’s fund balance.

The State and Local Government Finance Division in its role as staff to the Local Government Commission recently analyzed audited financial statements of Alamance County for the fiscal year ended June 30, 2012.

“In the General Fund, the percentage of fund balance available for appropriation relative to expenditures appears to be much lower than comparable units across the State,” Edmundson’s letter stated. “As of June 30, 2012, the amount of fund balance was $14,003,445 or 11.34 percent of total fund expenditures. However, when restricted cash is removed, it falls to $9,660,362 or 7.83 percent of expenditures.”

The LGC letter was discussed by the Alamance County Board of Commissioners on Monday during the 2012 financial audit report presentation provided by Crystal Waddell of Martin Starnes and Associates. Overall, Martin Starnes and Associates provided Alamance County with an unqualified opinion in its 2012 audit report which is the best type of report the county could have received. However, concerns about the fund balance remain.

Waddell said the LGC recommends that counties’ fund balances be at least 8 percent of total general fund expenditures and also be near the average level of counties in their population size.

Commissioner Tom Manning asked Waddell what the county needed to do to meet the LGC’s recommended fund balance requirements. Waddell said the county would have to double its available fund balance of $14 million to $28 million to reach the average 22 percent fund balance level for counties its size in population.

Commissioner Tim Sutton said he doesn’t believe the LGC’s county comparison by population is the best way to assess the fund balance since some counties’ tax rates are much higher. Sutton said some counties’ fund balances, including Davidson County, are excessive due to excessive taxation.

In her letter, Edmundson stated that Alamance County’s “current level of fund balance excluding the restricted funds is less than a month’s expenditures and leaves the county with minimal reserves for emergencies or opportunities.”

Edmundson requested that the county develop a plan to determine what expenditures can be reduced or which revenues can be increased to begin building general fund reserves. The LGC asked the county to respond to its letter in 30 days to explain how it plans to improve its fund balance.

County Manager Craig Honeycutt said he would draft a letter for commissioners’ approval in January to send to the LGC in regards to its request.

The county was able to increase its fund balance in fiscal 2011-12 by $2.5 million. Waddell said restricted cash in the fund balance represents unspent dollars designated for debt and grant spending.

The county’s total fund balance general fund was $21.6 million in fiscal 2011-12, of which $14,003,445 was available before restricted cash is removed. For fiscal 2009-10, the county’s total fund balance was $23,576,529 before it decreased to $19,110,850 in fiscal 2010-11.